SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-14353
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BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3244978
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
-------------- --------------
Cash and cash equivalents $ 6,520,784 $ 6,475,393
Accounts and accrued
interest receivable 51,412 28,827
Other assets - principally
escrow deposits 1,816,039 1,140,420
Prepaid expenses 250,245
Deferred expenses, net of accumulated
amortization of $285,520 in 1995
and $213,273 in 1994 1,141,572 973,153
-------------- --------------
9,780,052 8,617,793
-------------- --------------
Investment in real estate:
Land 12,380,326 12,380,326
Buildings and improvements 65,940,832 65,940,832
-------------- --------------
78,321,158 78,321,158
Less accumulated depreciation 27,989,567 27,027,028
-------------- --------------
Investment in real estate, net of
accumulated depreciation 50,331,591 51,294,130
-------------- --------------
$ 60,111,643 $ 59,911,923
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 153,243 $ 133,743
Due to affiliates 9,556 75,413
Accrued liabilities, principally
real estate taxes 440,602 366,628
Security deposits 266,786 288,084
Losses in excess of investments in
joint ventures with affiliates 327,772 553,742
Mortgage notes payable 56,847,922 57,381,930
-------------- --------------
Total liabilities 58,045,881 58,799,540
Partners' capital (82,697 Limited
Partnership Interests issued and
outstanding) 2,065,762 1,112,383
-------------- --------------
$ 60,111,643 $ 59,911,923
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- -------------
Income:
Rental and service $ 7,626,271 $ 7,332,670
Interest on short-term investments 207,776 73,637
Participation in income (losses)
of joint ventures with affiliates 733,561 (146,705)
-------------- --------------
Total income 8,567,608 7,259,602
-------------- --------------
Expenses:
Interest on mortgage notes payable 2,489,338 2,420,217
Depreciation 962,539 962,539
Amortization of deferred expenses 72,247 66,623
Property operating 2,159,216 2,297,013
Real estate taxes 501,860 482,998
Property management fees 372,421 365,123
Administrative 271,436 309,556
-------------- --------------
Total expenses 6,829,057 6,904,069
-------------- --------------
Income before extraordinary item 1,738,551 355,533
-------------- --------------
Extraordinary item:
Gain on forgiveness of debt 41,798
--------------
Net income $ 1,780,349 $ 355,533
============== ==============
Income before extraordinary item
allocated to General Partner $ 17,385 $ 3,555
============== ==============
Income before extraordinary item
allocated to Limited Partners $ 1,721,166 $ 351,978
============== ==============
Income before extraordinary item
per Limited Partnership Interest
(82,697 issued and outstanding) $ 20.81 $ 4.26
============== ==============
Extraordinary item allocated to
General Partner $ 418 None
============== ==============
Extraordinary item allocated to
Limited Partners $ 41,380 None
============== ==============
Extraordinary item per Limited
Partnership Interest
(82,697 issued and outstanding) $ 0.50 None
============== ==============
Net income allocated to
General Partner $ 17,803 $ 3,555
============== ==============
Net income allocated to
Limited Partners $ 1,762,546 $ 351,978
============== ==============
Net income per Limited
Partnership Interest
(82,697 issued and outstanding) $ 21.31 $ 4.26
============== ==============
Distributions to Limited Partners $ 826,970 None
============== ==============
Distributions per Limited
Partnership Interest $ 10.00 None
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Income:
Rental and service $ 3,827,995 $ 3,683,683
Interest on short-term investments 103,450 42,972
-------------- --------------
Total income 3,931,445 3,726,655
-------------- --------------
Expenses:
Interest on mortgage notes payable 1,247,669 1,212,614
Depreciation 481,270 481,270
Amortization of deferred expenses 37,615 33,312
Property operating 1,135,139 1,167,565
Real estate taxes 251,404 243,256
Property management fees 186,189 185,642
Administrative 137,907 168,602
Participation in losses of
joint ventures with affiliates 432 125,239
-------------- --------------
Total expenses 3,477,625 3,617,500
-------------- --------------
Net income $ 453,820 $ 109,155
============== ==============
Net income allocated to
General Partner $ 4,538 $ 1,092
============== ==============
Net income allocated to
Limited Partners $ 449,282 $ 108,063
============== ==============
Net income per Limited
Partnership Interest
(82,697 issued and outstanding) $ 5.43 $ 1.31
============== ==============
Distribution to Limited Partners $ 413,485 None
============== ==============
Distribution per Limited
Partnership Interest $ 5.00 None
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
-------------- --------------
Operating activities:
Net income $ 1,780,349 $ 355,533
Adjustments to reconcile net
income to net cash provided
by operating activities:
Gain on forgiveness of debt (41,798)
Participation in income (losses)
of joint ventures with affiliates (733,561) 146,705
Depreciation of properties 962,539 962,539
Amortization of deferred expenses 72,247 66,623
Net change in:
Accounts and accrued interest
receivable (22,585) 369,967
Other assets (338,869) (312,624)
Prepaid expenses (250,245)
Accounts payable 19,500 47,605
Due to affiliates (65,857) 101,286
Accrued liabilities 73,974 59,799
Security deposits (21,298) (10,142)
-------------- --------------
Net cash provided by
operating activities 1,434,396 1,787,291
-------------- --------------
Investing activities:
Capital contributions to joint
ventures with affiliates (15,749) (5,445)
Distributions from joint ventures
with affiliates 523,340 78,055
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Net cash provided by
investing activities 507,591 72,610
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Financing activities:
Distributions to Limited Partners (826,970)
Repayment of mortgage note payable (7,786,649)
Proceeds from issuance of
mortgage note payable 8,140,000
Principal payments on
mortgage notes payable (845,561) (518,041)
Refund of improvement escrow 32,250
Payment of deferred expenses (240,666)
Funding of improvement escrows (369,000)
-------------- --------------
Net cash used in
financing activities (1,896,596) (518,041)
-------------- --------------
Net change in cash and cash equivalents 45,391 1,341,860
Cash and cash equivalents at
beginning of period 6,475,393 3,129,791
-------------- --------------
Cash and cash equivalents
at end of period $ 6,520,784 $ 4,471,651
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1995, and all such adjustments are of a normal and recurring
nature.
2. Interest Expense:
During the six months ended June 30, 1995 and 1994, the Partnership incurred
interest expense on mortgage notes payable to unaffiliated parties of
$2,489,388 and $2,420,217 and paid interest expense of $2,489,338 and
$2,420,217, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1995 are:
Paid
--------------------
Six Months Quarter Payable
----------- --------- --------
Reimbursement of expenses to
the General Partner, at cost $157,060 $157,060 $9,556
4. Investment in Joint Venture With Affiliate:
Pinebrook Apartments was acquired by a joint venture consisting of the
Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of 48.43% and 51.57%,
respectively. In February 1995, the joint venture sold the property for a sale
price of $6,140,000. From the proceeds of the sale, $5,058,226 was paid to the
third party mortgage holders in satisfaction of the first, second and fourth
mortgage loans, as well as a brokerage commission and other closing costs. The
joint venture recognized a gain of $1,814,970 from the sale of this property,
of which $780,279 was the Partnership's share. Total proceeds received from the
sale of this property were $871,599, of which $422,115 was the Partnership's
share. The Partnership's share of the gain is included in "Participation in
income of joint ventures with affiliates" and is partially offset by the
Partnership's share of operating losses through the sale date.
5. Refinancing:
In May 1995, the Boulder Springs Apartments mortgage loan was refinanced. The
interest rate decreased from 12.875% to 7.59%, the maturity date was extended
from June 1995 to June 2002, and the monthly payment decreased from $90,457 to
$57,419. A portion of the proceeds from the new $8,140,000 first mortgage loan
was used to repay the existing first mortgage loan balance of $7,786,649.
6. Subsequent Event:
<PAGE>
In July 1995, the Partnership made a distribution of $3,721,365 ($45.00 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of Net Cash Receipts of $5.00 per Interest for
the second quarter of 1995, a special distribution of $20.00 per Interest from
Net Cash Receipts reserves, and a special distribution of $20.00 per Interest
from Net Cash Proceeds reserves.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors 85 - Series I A Real Estate Limited Partnership (the
"Partnership") was formed in 1983 to invest in and operate income-producing
real property. The Partnership raised $82,697,000 through the sale of Limited
Partnership Interests and utilized these proceeds to acquire ten real property
investments and minority joint venture interests in three additional
properties. During 1995, the Partnership sold one of its minority joint venture
interests, and in prior years, sold two of the properties and relinquished one
of the properties through foreclosure. The Partnership continues to operate the
remaining seven real property investments and two minority joint venture
interests.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.
Operations
----------
Summary of Operations
---------------------
The Pinebrook Apartments, which was owned by a joint venture consisting of the
Partnership and an affiliate, was sold in February 1995. The Partnership
recognized its share of the gain on sale which is the primary reason the
Partnership generated higher net income in 1995 as compared to 1994. In
addition, the Partnership had improved operations at certain of the
Partnership's properties. Further discussion of the Partnership's operations is
summarized below.
1995 Compared to 1994
---------------------
Increased rental and/or occupancy rates at four of the Partnership's seven
remaining properties caused an increase in rental income for the six months and
quarter ended June 30, 1995 as compared to the same periods in 1994. Cable
access fees received at two properties also caused an increase in service
income for the six months ended June 30, 1995 as compared to the same period in
1994.
The increase in cash flow from the Partnership's properties and the net
proceeds received in connection with the refinancing of the underlying mortgage
loan on Heather Ridge Apartments in 1994 caused the Partnership's cash balances
to increase. This, together with higher interest rates, resulted in an increase
in interest income on short-term investments during the six months and quarter
ended June 30, 1995 when compared to the same periods in 1994.
Property operating expense decreased for the six months and quarter ended June
30, 1995 as compared to the same periods in 1994 due primarily to decreases in
carpet replacement expenses at Boulder Springs and Forest Ridge-Phase I
<PAGE>
Apartments and landscaping expenses at Boulder Springs, Heather Ridge and
Templeton Park Apartments. This decrease was partially offset by increased
repairs and maintenance and landscaping expenses at Timberlake Apartments.
Due to lower legal fees, administrative expenses decreased during the six
months and quarter ended June 30, 1995 when compared to the same periods in
1994.
Pinebrook Apartments, in which the Partnership held a minority joint venture
interest, was sold during February 1995. As a result of the gain recognized in
connection with the sale, the Partnership recognized income from participation
in joint ventures with affiliates during the six months ended June 30, 1995 as
compared to a loss during the same period in 1994. In addition, the
Partnership recognized a smaller loss from participation in joint ventures with
affiliates for the quarter ended June 30, 1995 as compared to the same period
in 1994 due to the sale of Pinebrook Apartments.
During 1995, the Partnership recognized an extraordinary gain on forgiveness of
debt of $41,798 in connection with a settlement reached with the seller of the
Templeton Park Apartments.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased slightly as of June 30, 1995 as
compared to December 31, 1994. The Partnership's cash flow provided by
operating activities was generated primarily from the Partnership's properties,
and was partially offset by the payment of administrative expenses. The
Partnership received cash flow from investing activities which consisted of a
net distribution from its joint ventures with affiliates which includes
proceeds from the sale of the Pinebrook Apartments. Financing activities
consisted of net proceeds received from the refinancing of the Boulder Springs
Apartments mortgage loan which, along with a portion of the cash provided by
operating and investing activities, were used for the payment of deferred
expenses and funding of improvement escrows in connection with the refinancing.
Cash was used in other financing activities for principal payments on mortgage
notes payable and distributions to Limited Partners.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit, or a significant deficit, each after
consideration of debt service payments. A deficit is considered to be
significant if it exceeds $250,000 annually or 20% of the property's rental and
service income. The Partnership defines cash flow generated from its properties
as an amount equal to the property's revenue receipts less property related
expenditures, which include debt service payments. During the six months ended
June 30, 1995 and 1994, all seven of the Partnership's properties generated
positive cash flow. Of the remaining two properties in which the Partnership
holds minority joint venture interests, the North Hill Apartments generated
positive cash flow during the six months ended June 30, 1995 and 1994. The
Seabrook Apartments generated a marginal cash flow deficit during the six
months ended June 30, 1995 and 1994 due to an increase in the interest rate of
its mortgage note payable.
While the cash flow of certain of the Partnership's remaining properties has
improved, the General Partner continues to pursue a number of actions aimed at
further improving the cash flow of the Partnership's properties including
refinancing of mortgage loans, improving property operating performance, and
<PAGE>
seeking rent increases where market conditions allow. As of June 30, 1995, the
occupancy rates of the Partnership's properties ranged from 91% to 99%. Despite
recent improvements in the local economies and rental markets where certain of
the Partnership's properties are located, the General Partner believes that
continued ownership of many of the properties is in the best interest of the
Partnership in order to maximize potential returns to Limited Partners. As a
result, the Partnership will continue to own these properties for longer than
the holding period for the assets originally described in the prospectus.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. As a result of the General
Partner's successful efforts to obtain loan modifications, as well as
refinancings of many existing loans with new lenders, the Partnership has no
third party financing which matures prior to 1997.
In May 1995, the Boulder Springs mortgage loan was refinanced. Proceeds from
the new loan of $8,140,000 were used to pay the existing loan of $7,786,649.
See Note 5 of Notes to the Financial Statements for additional information.
The Pinebrook Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. In February 1995, the joint venture sold the
property in a cash sale for $6,140,000. From the proceeds, $5,058,226 was paid
to the third party mortgage holders in satisfaction of the first, second and
fourth mortgage loans. Additionally, $716,729 was paid in satisfaction of the
third mortgage note payable to Pinebrook Limited Partnership, a separate joint
venture consisting of the Partnership and the affiliate. Total proceeds
received from this transaction were $871,599, of which $422,115 was the
Partnership's share. See Note 4 of Notes to the Financial Statements for
additional information.
In July 1995, the Partnership made a distribution of $3,721,365 ($45.00 per
interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of Net Cash Receipts of $5.00 per Interest for
the second quarter of 1995, a special distribution of $20.00 per Interest from
Net Cash Receipts reserves, and a special distribution of $20.00 per Interest
from Net Cash Proceeds reserves. To date, including the July 1995
distribution, Limited Partners have received cumulative cash distributions of
$60.00 per $1,000 Interest as well as certain tax benefits. Of this amount,
$40.00 has been from Net Cash Receipts and $20.00 has been from Net Cash
Proceeds. The General Partner expects to continue quarterly distributions to
Limited Partners. However, the level of future distributions, if available,
will depend on cash flow from the Partnership's remaining properties, the
successful refinancing of certain mortgage loans and proceeds from future
property sales, as to all of which there can be no assurances.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
(4) The Subscription Agreement as set forth as Exhibit 4.1 to Amendment No. 1
to Registrant's Registration Statement on Form S-11 dated November 29, 1984
(Registration No. 2-92777) and Form of Confirmation regarding Interests in the
Partnership as set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-14353) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
--------------------------------
Thomas E. Meador
President and Chief Executive Officer (Principal
Executive Officer) of Balcor Partners-XVI, the
General Partner
By: /s/Brian D. Parker
--------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners-XVI, the General
Partner
Date: August 10, 1995
-------------------------
<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 6521
<SECURITIES> 0
<RECEIVABLES> 51
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8638
<PP&E> 78321
<DEPRECIATION> 27990
<TOTAL-ASSETS> 60112
<CURRENT-LIABILITIES> 870
<BONDS> 56848
<COMMON> 0
0
0
<OTHER-SE> 2066
<TOTAL-LIABILITY-AND-EQUITY> 60112
<SALES> 0
<TOTAL-REVENUES> 8567
<CGS> 0
<TOTAL-COSTS> 3034
<OTHER-EXPENSES> 1306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2489
<INCOME-PRETAX> 1738
<INCOME-TAX> 0
<INCOME-CONTINUING> 1738
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<EPS-PRIMARY> 21.31
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</TABLE>
